Okay, I haven't talked about this 'situation' yet on my blog, but I thought the time was right to see what others would do in my situation. If anyone recalls, Offer #6 is a HUD foreclosure that I won when the bidding wars were over. It originally had a list price of $112,000, and my offer was $101,000.
However ...
My RE agent had never done a HUD contract before. When she submitted my offer, she made the "Net to HUD" value my offer price ($101,000). In other words, she screwed herself out of a commission. Now, she told me this shortly afterward via email, and said she would have to eat it - IOW, make it an expensive lesson. Me, being naive and wanting to hold onto her as a good source of properties, told her that I was willing to pay half of her commission. Of course, she gleefully agreed to my offer via email (i.e., no formal documents were signed stating such an agreement). Well, I found out that she may have tried unsuccessfully to amend the contract to get her full commission (I don't know it for a fact - just something a 3rd party told me). Nothing else has been said about the blunder and me helping to pay for her commission since our initial emails about it.
Now, my wife - who pays strict attention to details and would probably make a great CEO one day - says that since nothing was signed on paper, my agent should get nothing (even my loan officer said the same thing). However, I feel kind of bad not living up to my "email" agreement with her. BTW, my portion would come out to $2,525 for her commission.
What would you do in my situation?
Also, I plan to close on the property next week. If I do decide to pay some or all of my part of her commission, would you pay her at closing? Or, would you pay her when you sell the house (whether or not you use her to sell it)?
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11 comments:
Tough question.
I think that she should eat her mistake. However, since you did offer her half, you should honor your word and do half. Unless she tried to get by you somehow, then negotiations are open again.
BTW, that seems a bit suspect since you did have to go to her the other day to re-sign your contract since you signed your name one way in some places and differently in others. Did you review everything at that time?
I think that she just became your business partner on this deal. Honor your word. She has a family or herself to support. Don't steal what is rightfully hers. She did the work. now honor it. Steve? are you going to build your empire on the backs of other people? When you are Financially Free. You will feel better about your money if you don't step on people on the way up. If it were a bank or mortage company. Screw em! not a working stiff. you said you don't want to be a corporate slave. don't be a corporate task master. I have lived with nothing for a long time to get my portfolio together. And I sleep well at nite. Don't be like the rest of the greedy world. pay the woman. it is the only right thing to do. Negotiate payment when she sells it for you. that would be added incentive. Just my opinion I will never spout off unless you ask. Happy investing. Richard
anon - Yes, I thought it suspect, too. However, I always thouroughly read everything that requires my signature. Somtimes this aggravates people as they want just want you to sign and not spend time reading. Nothing in the documents I signed seemed to deal with a changed price - just my middle inital and my wife's name for title purposes.
richard - That's my thinking as well. While she has irked me a few times on this and other deals, she has definately helped me along the path to financial freedom. I've always regarded myself as an honest person, and I don't want to start being dishonest now. My biggest concern is finding the money to pay her in addition to the closing costs. As it is with the new terms, I won't have to break any of my piggy banks on the deal. However, if I have to pay her $2,500 then I'll definately have to get a cash advance, signature loan, 401k loan, or some other loan. I may ask her if I can pay in installments until the property gets sold, and then pay her the balance. she mentioned before that if I buy a property through her and sell it throug her, she'll only ask for 5% total, so I may pay her 0.5-1.0% at closing next week, and the remainder (4.0-4.5%) when the property sells. Either way, you are correct about honesty. It also makes me sleep better at night. BTW, chime in any time you feel like it. I consider myself thick-skinned and actually like constructive criticism, so don't hold back in giving advice no matter how harsh it may be.
BG - The part about my wife sounds like it comes from experience. ;-)
You're right on two fronts ... My wife will be pissed if I do, and the agent will be pissed if I don't. And I thought dealing with the lender and HUD were the toughest parts of this deal. LOL!
I agree that you need to pay her. So what was the 5% total deal - 2% on the buy 3% on the sell? Maybe she'll take 1% on the buy and 4% on the sell. It'll be more money for her since she gets that 1% on a higher price. Whatever happens, you want to treat her fairly and keep the relationship in good standing.
Oh wait a second - First off, even if she had written in her commission it would have been 3% of the total sale - not 5 or 6%. There is always a listing agent and the listing agent gets their 3% no matter what, meaning the most she would have been entitled to is 3%, which is less than the 2500 odd dollars youre mentioning. If shes willing to take the 2500 and not say anything, that sounds like strike 3 or 4 or something to me. If you do want to live up to your end, I would say you can pay her back however you want. Did you tell her, Ill give you a check for your part at closing? Youre free to pay her back however you'd like, and she should be happy to get it since she was expecting nothing at first anyways. Its up to you but - Unless Texas is different the max she is entitled to is 3% (half of the 6% agents get - the other half going to the listing agent, which there always is one).
Just to further clarify since reading over it, my comment didnt make the most sense - You said you'd pay her half of her commission which should normally have been 3%, making it 1.5% for a total of $1515 from a purchase price of 101k. Also I should point out my bias that in my experience most realtors are worthless, however when you find a good one, they are so rare, its best to take care of them. I have yet to find a good one myself though. :(
I agree with Ryan, first find out how much her commission would be exactly and then pay 50% of it. It shouldn't be $2500, cause that would be she was getting $5k on the buy side of a $101k house. That's just too much. I should be 2.5%-3% and then you pay 50% of that.
To be perfectly honest, I have no clue where I got the $2,525 figure now. I did some calculation back at the beginning on paper, but have since misplaced it. No matter what I try to figure now, I can't seem to come up with the same result, so I'm at a loss. What I think I'll do is just offer her 1.5% of the list price ($112,000), or $1,680. This would be half her commission, which is what I originally said I'd pay. Since I told her I'd use her to sell the house - if I do in fact sell it - she said the total buy/sell on her end would be 5%. Since I'm paying half her 3% commission on the front-end, all I'd need do is pay 2% on the back-end. If it comes down to paying 2% on the sell side and losing her or paying 3% and keeping her, I'd probably pay the 3%. But that's only if she screams and howls. :-)
$2525 is 2.5% of 101k, which probably came from you thinking you needed to pay her half of 5%.
ryan - I remember it had to do with half the difference between $106,050 and $101,000, but I haven't the foggiest where I got $106,050 from now. Oh well. Note to self: start taking better notes! :-P
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